Federal probe turns up $5 million in unused computer equipment

SBC Corp. is refunding more than $8 million for failing to install computer equipment in Chicago schools by deadlines set under the federal eRate program, a company spokesman said Jan. 16.

Congressional investigators looking into possible instances of eRate waste, fraud, and abuse say $5 million worth of computer equipment bought for Chicago schools has languished in a warehouse for years.

Republican leaders of the House Energy and Commerce Committee sent a letter Jan. 15 to Chicago Public Schools chief Arne Duncan requesting audit records and other documents related to the district’s participation in the eRate, which was set up to help connect low-income and rural schools and libraries to the internet.

Chicago school officials said the computers and equipment in question never left the possession of SBC, the distributor from which it was purchased with federal eRate funds.

Selim Bingol, an SBC spokesman, said the equipment represented a small percentage of the $159 million contract the company had with Chicago schools. Bingol said the company has wired about 300 Chicago schools as part of the project.

The equipment in question was not installed under the strict timetable–usually about a year–the government requires, Bingol said.

The company will refund the Schools and Libraries Division of the Universal Service Administrative Co., the agency that administers the eRate, for the full amount of the portion of the project that did not meet the deadline. But because about $3 million of that eventually was installed, the company will seek that amount back, Bingol said.

He said SBC is working with the school district to determine what to do with the unused equipment.

Under the eRate, the government pays up to 90 percent of the cost of telecommunications services, internet access, and internal connections for eligible schools and libraries. The schools must pay the remaining portion of the cost. eRate funding comes from charges to phone companies, who usually recover the costs by billing customers a line-item for “universal service” on monthly phone bills.

“It is troublesome to us that $5 million of equipment is sitting unused in a warehouse gathering dust,” said Ken Johnson, a spokesman for the House Energy and Commerce Committee. “I’m sure ratepayers would like to have that money back.”

The district is looking into the findings and will cooperate with all the government requests, school officials said.

The school system opened the contract to manage the eRate program for rebidding. A new company, Blackwell Consulting Services of Chicago, will take over the job from SBC in the fall, said Peter Cunningham, the schools’ communication director.

Chicago schools have received $300 million in eRate funds since 1998, Cunningham said.